[Click eStock] "Emart Earnings Downgraded... Target Price ↓"

[Image source=Yonhap News]

Ebest Investment & Securities announced on the 12th that it is revising down its earnings forecast for Emart. The investment rating of 'Buy' is maintained, but the target price has been lowered to 123,000 KRW.

Orin Ah, a researcher at Ebest Investment & Securities, explained, "We revised down the earnings by reflecting factors such as the renewal of discount stores, a high base in Traders' average spending per customer, and cost burdens from SKC Company."

The first-quarter performance was much weaker than expected. First-quarter sales increased by 1.9% year-on-year to 7.1354 trillion KRW, while operating profit fell by 60.4% to 13.7 billion KRW. This figure significantly missed market expectations.

Researcher Oh analyzed, "The main reasons for the earnings decline were three fewer holidays compared to the same period last year, early commencement of renovation work at Yeonsujeom and Kintex stores, and cost burdens from SKC Company. Despite profit and loss improvements from the e-commerce subsidiary and the reopening benefits of Chosun Hotel, the consolidated earnings were somewhat disappointing."

Traders also recorded a same-store sales growth rate of -6.1% in the first quarter, influenced by the high base of average spending per customer that rose during the COVID-19 period (a cumulative increase of 25% since 2020) and holiday effects. The specialty store segment posted solid results due to improved sales and profitability of No Brand.

Ssg.com’s first-quarter operating loss was 15.6 billion KRW, an improvement of 10.1 billion KRW compared to the same period last year. Gmarket’s operating loss also improved by 8.5 billion KRW year-on-year to 10.9 billion KRW. However, SKC Company, which had been a cash cow, recorded an operating profit of 20.5 billion KRW in the first quarter, which was somewhat disappointing, as cost burdens due to exchange rate increases continue.

The second quarter outlook is favorable. Researcher Oh stated, "Property taxes in the second quarter are somewhat defensive due to factors such as partial asset sales, and in the second half of the year, the number of holidays is two days more than in the first half, which is somewhat positive for store operations."

He added, "There is a clear improvement in the performance of stores after renewal, and since SKC Company had one-off factors in the second half of last year, there is a high possibility of earnings improvement in the second half."